The Bank of England raised interest rates in the United Kingdom by 0.50 percentage point on Thursday to 2.25%, its highest level since December 2008.
The British central bank’s monetary policy committee has accelerated rate hikes in a bid to combat inflation, which stood at 9.9% in August, against its official target of 2%.
The increase in the price of money in the United Kingdom occurs after the United States yesterday raised interest rates in that country by 75 basis points, which are located in a range of between 3 and 3.25%, also its lowest level. high in 14 years.
For its part, the European Central Bank (ECB) also raised them to 1.25% on September 8, the largest increase in its 24-year history.
The Bank of England committee also voted unanimously to reduce its portfolio of government bonds bought in its quantitative easing program, introduced during the 2009 financial crisis.
Thus, it plans to reduce it by 80,000 million pounds (€91,500 million, at today’s exchange rate) in the next twelve months, to 758,000 million pounds (€870,000 million), it indicates in its statement.
The entity estimates that the national gross domestic product (GDP) could have contracted by 0.1% between July and September, which, added to the contraction of 0.1% between April and June, would mean that the United Kingdom is already in a recession.
It also modified its inflation forecast, whose peak now stands at 11% in October, compared to the 13% previously forecast, considering that the Government’s plans to contain energy prices will contribute to curbing the consumer price index (CPI ).
Regarding rates, five members of the monetary policy committee voted to increase the rate by those 0.5 percentage points, three advocated raising it by 0.75 points and one would have preferred an increase of 0.25 percentage points, explains the entity.
The committee warns that at its November meeting it will analyze the impact on its economic forecasts and the possible impact on rates of the new “growth” plan that the conservative government of Prime Minister Liz Truss will present this Friday.
The Executive has indicated that it is preparing potentially inflationary measures that increase public debt, such as a reduction in corporate tax and the elimination of the cap on the bankers’ bonus, in addition to guaranteed loans to energy distributors to limit the increase in invoices.
The Bank of England is also keeping an eye on developments in the pound sterling, which has depreciated sharply against the dollar on fears about the state of British finances.